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NCM 2020: Markets Were Volatile Globally in Year 2020 as COVID-19 Pandemic Induced Uncertainty

Capital Market Report	1728 VIEWS
Capital Market Report
1728 VIEWS

Saturday, January 30, 2021 /06:00 AM / By Proshare Research/ Header Image Credit: EcoGraphics

Equities Market Review

Markets all over the world were volatile during the year as the coronavirus pandemic caused high levels of uncertainty, the emergence of new gainers, and losers in markets. Despite the effect of the coronavirus on some economies, their market performance was positive during the year. Some gains recorded in markets could be attributed to investor's confidence in the positive outlook of the economy given the government's actions to stimulate a quick rebound in the economy. Conversely, some markets closed in the red in 2020 despite actions by the government to stimulate investors' confidence in the market.

Furthermore, technology stocks gained prominence in most countries in the year 2020. This was supported by the need to maintain social distance, and work from home to halt the spread of the virus e.g., some technology stock share price like Zoom, Tesla, Amazon, and so on, increased in 2020. On the other hand, in some countries the improvement in the stock market could be attributed to government policy e.g., in Nigeria, the CBN's reduction in its monetary policy rate to 11.5% increased liquidity in the economy and these led to investors flocking the capital market with limited investment options available to them.

Global Market Review

The Majority of the Global stock markets tracked by Proshare closed the year positive amidst the coronavirus pandemic. In the year under review, amongst the Thirty-three (33) stock markets that were reviewed, (19) were in green which signifies an improvement, (5) stock markets did not record any change while (9) stock markets were in red which indicates losses. Nigeria's All Share Index topped the list with a +45.07% gain followed by USA Nasdaq and South Korea's KS11 with +43.22% and +32.01% gains, respectively. Conversely, Austria's ATX, FTSE 100, and Singapore's STI dipped by -12.68%, -12.49%, and -11.39% respectively to top the list of markets in the red. The Nigerian Stock Market, which is our primary monitoring market, the key benchmark index, NSE ASI, YTD was the best performing stock market with gains of +45.07%.

Table 1: Global Market Review

Gainers

Nasdaq +43.22%

Nasdaq recorded a YTD performance of +43.22% in 2020 which is the fifth-best year in its history. The performance of the Nasdaq was very impressive given the surge in the interest of investors in Technology stocks.
The coronavirus pandemic caused a major drift of investors' interest in technology stocks.
Companies such as Amazon, Facebook, Apple recorded an increase in their profits and share prices despite the effect of the pandemic on the economy.

KOSPI +32.01

Despite the ravishing effect of the coronavirus pandemic on the South Korean economy, its stock market recorded positive gains at the end of the year.
The South Korea stock market ended the year with 2,873.47 points, which is +32.01% higher than 2,176.67 points recorded as of 31^st December 2019.
The YTD increase in the performance of the KOSPI could be attributed to gains in financial shares, technology stocks, and industrials.
The major driver for the boom in South Korea's stock market was attributed to the actions of retail investors that flocked to growth and value stocks.
Retail investors were truculent in taking the risk on stocks, flocking the stock market to pick up equities ditched by foreign and institutional investors.

Taiwan (The Taiwan Weighted Index) +21.38%

The pandemic caused panic and sharp fluctuation of the Taiwan Stock Exchange (TWSE), as the stock market recorded a low of 8,523.63 points in March.
The Taiwan Stock Exchange closed the year with 14,687.7 points, +21.38% higher than 12,100.48 points recorded as of 31^st December 2019.
Taiwanese government stimulus incentives and National Stabilization Fund helped trigger the gain in the momentum of the weighted index in 2020.
The major driver of Taiwan's bullish domestic market was the increase in the share price of the world's No.1 contract chipmaker known as Taiwan Semiconductor Manufacturing Co. (TSMC).
Some market analysts have predicted that the domestic market could break a new high of 15,000 points in the first half of 2021.

SSE 180 Index (Shanghai) +16.75

SSE 180 Index tracks the daily price performance of the 180 most representative A-share stocks listed on the Shanghai Stock Exchange.
SSE 180 index ended the year on a positive note, as it recorded positive gains of +16.75%. Its index point closed the year with 10,476.12 points as of December 29^th, 2021 an increase from 8,972.92 points recorded on December 31^st, 2019.
The positive performance of the SSE 180 index could be attributed to the quick rebound of economic growth in the Chinese economy.
The quick rebound of the Chinese economy helped fuel the expectations that blue-chip companies would record profits. Hence, investors flocked to blue-chip stocks on the SSE 180 index.

Nikkei 225 +16.01%

The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. The Nikkei measures the performance of 225 large, publicly owned companies in Japan from a wide array of industry sectors.
The Nikkei 225 ended the year 2020 with an index point of 27,444.17, a YTD increase of +16.01%.
The impressive performance of the Nikkei 225 was attributed to the positive investor sentiment given the dovish monetary policies from central banks in Japan, the US, and Europe, as well as a string of positive vaccine news.

Losers

Austria ATX -12.68%

The Austrian Traded Index (ATX) is the leading index of Wiener BÃ¶rse which tracks the price trends of the blue chips on Winer Borse.
ATX closed the year with 2,792.93 index points. It recorded a YTD decline in index points of -12.68%.
The decline in the ATX index could be attributed to negative investor sentiment that played out during the year.
The coronavirus pandemic affected productive activities in the Austrian economy, as the Austrian economy contracted by -6.4% in Q2 2020 and -3.80% in Q3 2020.
The pessimistic outlook of the Austrian economy affected investors' confidence in companies listed on the bourse.

FTSE 100 -12.49%

FTSE 100 closed the year on a negative note. It ended the year with 6,600 index points, as it recorded a YTD decline in index points by -12.49%.
A major reason attributed to the decline in the FTSE 100 is heightened worries over an extended period of lockdowns which increased uncertainty about the Britain economy.
Furthermore, the government's Brexit deal did not allay fears of a potential breakdown at the border.
Also, it remains fuzzy on how the services sector will be affected as the deal underestimates the importance of the services sector which makes up about 80% of the UK economy.

Straits Times (STI) -11.39%

Straits Times (STI) closed the year in the red. It ended the year with 2,869.22 index points, as it recorded a YTD decline in index points by -11.39%.

The STI was a rollercoaster throughout the year as it recorded over 3,000 index points at the beginning of the year.
The decline in the STI could also be attributed to the negative perception and uncertainty about the outlook of the Singaporean economy.
Singapore's economy dipped by -3.8% in Q4 2020 while on an annual basis it contracted by -5.8%.

MerVal -7.87%

Unlike in the previous year when the Argentine bourse ended the year with a YTD increase of +37.60%, the narrative for 2020 was different.

The Argentina MerVal ended the year 2020 on a negative note. It ended the year with 38,390.84 index points, as it recorded a YTD decline in index points by -7.87%.
Argentina's weak economy which was further exacerbated by the advent of the COVID-19 pandemic led to negative investor sentiment.

Belgium (BEL-20) -7.42%

The BEL20 is the benchmark stock market index of Euronext Brussels.
It tracks the performance of the 20 most capitalized and liquid stocks traded in Belgium. It is a modified capitalization-weighted index.
It ended the year with 3,662.28 index points, recording a YTD decline in index points by -7.42%.
The Argentine economy is currently battling with sovereign default, sliding reserves, double-digit inflation (35.8% as of November 2020), and a currency crisis.

Africa Market Review

There was a decline in the performance of the African Stock market in 2020 when compared with the previous year. Amongst the thirty-six (36) African stock markets reviewed, (11) were in green signifying an improvement, one (1) remained unchanged, while (23) were in red signifying a dip. The EGX 70 EWI topped the list with a gain of +289.68% while Zimbabwe's ASI and Egypt EGX 100 EWI were second and third with gains of +220.91%, and +115.90% respectively. The three top losers were Kenya's 20 Share Index, Mauritius SEM-10, and Uganda's All Share Index with losses of -30.72%, -28.30%, and -28.07% respectively.

Table 2: Africa Market Review

Gainers

Egypt EGX 70 EWI +289.68%

The Egyptian Exchange launched an equally weighted index EGX70EWI on 02 February 2020. The Index includes the top 70 companies in terms of Liquidity and activity after excluding the constituents of EGX30.
EGX70EWI avoids concentration on one industry therefore has a good representation of various industries/sectors in the economy.

Zimbabwe EGX 70 EWI recorded a significant improvement in 2020. The EGX 70 EWI ended the year with 2,082.72 index points, as it recorded a YTD increase in index points by +289.68%.

Zimbabwe All Share Index +220.91%

Zimbabwe All-Share Index, the main index of the financial market grew by +220.91% YTD. Its index point increased to 2,459.23 basis points as of the end of the year.
Zimbabwe's performance is surprising given the present economic woes betiding the country. Its growth rate has been slow and economic pressures further exacerbated its growth rate while its inflation rate as of November 2020 stood at 401.66%.
The growth in the Zimbabwe All Share Index could be attributed to the devaluation of the local currency which prompted investors to inject money into listed companies.

Rwanda RSI ASI +19.95%

Despite the contraction in Rwanda's GDP in Q3 2020 by -3.6%, investors' confidence in the rebound on the Rwandan economy fuelled positive investor sentiment in the financial market.
Rwanda RSI ASI index increased by +19.95% YTD in 2020. Its index points increased to 148.02 points as of the end of the year 2020.

Losers

Kenya 20 SHARE INDEX -30.72%

The Nairobi Securities Exchange 20 Share Index NSE20 is a major stock market index that tracks the performance of 20 best performing companies listed on the Nairobi Securities Exchange.
The companies are selected based on weighted market performance for 12 months, market capitalization, number of shares traded, number of deals, and turnover.
Kenya's "20 share index" recorded the highest decline amongst the African markets tracked by Proshare.
It declined by -s30.72% YTD in 2020. Its index points at the end of the year declined to 1,838.84 index points.

Mauritius SEM-10 -28.3%

The SEM-10 consists of the 10 largest companies by market value.
SEM-10 recorded the 2^nd highest decline amongst the African markets tracked by Proshare.
It declined by -28.3% YTD in 2020, as its index points at the end of the year declined to 308.2 index points.

Uganda All-Share Index -28.07%

Uganda All Share Index (ALSI) is the benchmark index for the Ugandan equity market.
It tracks the performance of 16 listed security equities, of which half are local companies and the other half are cross-listed Kenyan companies.
It declined by -28.3% YTD in 2020. Its index points at the end of the year declined to 308.2 points.

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